Tezos: The Surge Continues. Should You Buy XTZ?

Tezos’ climb through the crypto-market index continued Sunday, as the native XTZ token clawed back above $1.00 for the first time since November. Underpinning the rally was a new initiative by Coinbase giving institutional investors the opportunity to stake XTZ tokens for passive income.

XTZ Price Update

The XTZ price surged 15.5% on Sunday to $1.06, the highest since November 16. XTZ has more than doubled in price since the beginning of the year and is now one of the best-performing cryptocurrencies of 2019.

At current values, the Tezos blockchain has a total market capitalization of $703 million, according to CoinMarketCap. That puts it well ahead of NEO (NEO) for 17th spot on the market cap index and just $7 million shy of Maker (MKR), another high-flying small-cap.

In the first week of January, Tezos was ranked 23rd by market cap with a total value of around $294 million. The platform for smart contracts and decentralized applications has benefited from positive fundamental news, including full integration of XTZ in the Bitfi hardware wallet and a partnership with a high-profile dapp organization. Read more – Rise of the Small-Caps: Tezos, Zcash, VeChain Surge as Majors Stagnate.

Get Baked

San Francisco-based cryptocurrency exchange Coinbase announced Friday that institutional investors will have the opportunity to earn interest on their Tezos holdings by participating in the platform’s proof-of-stake mining protocol. Coinbase chose Tezos as its first staking asset because of its delegated proof-of-stake architecture and high demand from current institutional clients.

Technically, Tezos’ governance model is called “baking,” which refers to the action of signing and publishing a new block in the chain. To qualify as a delegate for the baking process, users must have at least 10,000 XTZ in their possession. The larger their holdings, the better the odds of finding a block.

“The launch of Tezos staking through Coinbase Custody serves an acute need that existed up until now: a way for institutional participants who rely on a secure, offline custodian to take an active role in the network. Achieving our mission of creating a ‘digital commonwealth’ means facilitating participation for all, and that includes the institutional customers that Coinbase Custody brings to the space.” – Kathleen Breitman, Tezos Co-Founder (Source: Coinbase Blog)

By holding XTZ and enabling the baking process, Coinbase Custody users can earn revenue from their investments. This not only boosts network security, it creates added incentive to hold the cryptocurrency.

Should You Buy Tezos?

Like other alternative cryptocurrencies, Tezos has a negative ROI since its initial offering (-36% to be exact). Peak-to-trough, the cryptocurrency plunged over 97% during the bear market.

Despite the significant drop, Tezos is one of several small-cap cryptocurrencies that has shown unique price independence relative to bitcoin and the broader market. This means XTZ is more likely to be influenced by fundamentals instead of just moving in lockstep with the broader market. Cryptocurrencies that have escaped bitcoin’s gravitational pull have performed extremely well this year.

The launch of Tezos staking through Coinbase Custody is also a significant milestone. Coinbase acknowledged that the decision to start with Tezos was due to high demand from institutional clients, which together have poured some $600 million into the platform.

Given that Tezos is still trading at a tiny fraction of its all-time high, it is considered a low-risk, high-reward opportunity. At current values, a $200 investment would get you 188 XTZ. If XTZ ever managed to return to record highs, your initial investment would grow to around $2,400.

Disclaimer: The author has no investment stake in Tezos. The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi